Wednesday, September 20, 2017

EPF Should Not Sell PLUS

Is there an alternative to North South Highway? How much of toll roads come under PLUS? There are 14.5m EPF members. We begrudgingly pay tolls, at least thinking some of it goes back to EPF returns.

If you look at our population bell curve, you can surmise that we are a growing population with a relatively wider base. In many aspects we are skewed towards a younger working population. This means that the annual contributions to EPF is likely to grow even more.

We can also surmise that there are limited investing opportunities locally, taking into account the kind of risk EPF is allowed to partake. PLUS is a significant player in an infrastructure that plays a critical role for the country. To replace PLUS with a similar investment with similar returns would be very difficult.

Fair Value - Not Enough Even

As a socialist-capitalist, I can be torn between getting more than a fair return on investment. That is, if an asset is being sold at higher than normal valuations, by all means, sell. I am certain that any potential buyer would have to offer a premium. The question then is how much of a premium would it make sense for EPF and Khazanah to dispose PLUS.

To me, the premium would have to be very high, so high that it would be silly not to sell, so high that it would be sillier to buy.

p/s: Yoona of Girls Generation

Critical Asset

Imagine a few years down the road, instead of the usual 5-10% annual increment, you see your normal RM1.10 toll

being raised to RM2.50. I am not saying it will happen. Yes there are rules to safeguard some of the increments, but seriously, it can only go up, and it won't be LESS than when EPF/Khazanah are the owners.

We are already having to increase our investing overseas owing to the deluge of contributions into EPF. We should not replace PLUS or assets with similar values.

Cornerstones Should Not Be Tampered With

We should be thankful that EPF has been able to give around 6% annual returns (tax free). Go and ask CPF whats their rate for the past few years. The high-ish rate is thanks to a solid platform girding the overall investing philosophy. Cagamas and other critical asset like PLUS are the cornerstones. You do not want to remove the cornerstones as the foundation would be shaky then.

No comments:

Bohemian Rhapsody - Review & Personal Notes

Movie Review : It is terribly unfair with all the hype surrounding the movie prior to its release. Expectations were high. If you don...